HD29 - Special Report on the Duties and Responsibilities of the Department of the State Internal Auditor


Executive Summary:
The Department of the State Internal Auditor (DSIA) was created by statute on July 1, 1985. Prior to July 1, 1985, the function existed as a separate program within the Department of Accounts. The program was established because there were significant shortcomings reported in the State's overall internal auditing program. Two previous studies of the program were conducted by the Department of Management Analysis and Systems Development in 1979 and the Department of Information Technology in 1985.

The statutory mandate to DSIA was "... to provide for the development and maintenance of internal audit programs in state agencies in order to ensure that the Commonwealth's assets are subject to appropriate internal management controls." In connection with its overall mission, certain duties were delineated through the Code. These duties were:

"1. To establish state policies, standards, and procedures which will ensure an effective internal audit program in all state agencies;

2. To provide technical information to state agencies concerning trends and new techniques in internal auditing;

3. To develop evaluative tools and other modern methods to assist agency internal auditors in performing audits;

4. To assist state agencies in developing and implementing automated data processing internal audit programs in the Commonwealth;

5. To provide general technical and audit assistance to agency internal auditors and to the Auditor of Public Accounts and the Governor on request;

6. To assist agency heads and collegial bodies in establishing and operating internal audit organizations;

7. To assist in the professional development of agency internal auditors by developing and conducting training programs;

8. To examine the adequacy of agency internal audit programs through periodic assessments of such programs and provide Governor's Secretaries and agency heads with the results of such assessments;

9. To develop, in conjunction with the State Comptroller, the Auditor of Public Accounts, the Joint Legislative Audit and Review Commission, and other appropriate state officials, a plan for accommodating the internal audit needs of agencies that do not require full-time internal auditors; and

10. To prepare a biennial report for the Governor, Governor's Secretaries, Auditor of Public Accounts, and appropriate agency heads on the status of agency internal audit programs generally, and on agency adherence to other legislative requirements on internal auditing."

In addition to describing the Department's specific duties, the Code also required that the Secretary of Finance review the DSIA functions "... to determine if the duties of the Department should be restructured or eliminated." While the review was initially established to occur five years from the effective date of the statute or in the summer of 1990, because the Department prepares biennial reports to the Governor relative to the status of the state's internal auditing program, it was deemed more appropriate and efficient to conform the date of the accompanying report with the second biennial report to the Governor.

The accompanying report has been formatted to analyze and evaluate each of the ten specific duties highlighted above by applying the following criteria and questions:

Need--Why was the duty initially established?

Accomplishment--What has DSIA done to fulfill the duty?

Relevancy--Is the duty still relevant? Why?

The results of the current review indicate that all of the existing duties of DSIA remain relevant and appropriate. In addition, the results reflect the excellent professional leadership and direction DSIA has provided to the State's administrators, national and local auditing organizations and State agency internal auditors. The results also show that Virginia's internal auditing program is nationally recognized as one of six states which have adopted the Institute of Internal Auditors' Standards for the Professional Practice of Internal Auditing.

Based on this review and the State Internal Auditor's June 30, 1989 Biennial Report to the Governor of Virginia, it became apparent that additional requirements were needed to strengthen accountability and overall effectiveness of the State's internal auditing program. The following additional requirements are therefore recommended:

• That the Governor, the State Comptroller and the Director of the Department of Planning and Budget receive copies of DSIA's external review reports in addition to State agency heads and Cabinet Secretaries who already receive the reports. Code Section 2.1-234.32.8 must be amended to implement this recommendation.

• That this expanded reporting structure require DSIA to develop a process to report periodically to the Governor unresolved weaknesses in agency internal auditing programs. Through such a process, the Governor will have the opportunity to address significant agency internal auditing issues in a timely and decisive manner.

The two expanded responsibilities of DSIA will promote opportunities for increased accountability of agency internal auditing programs at a time when effective management controls of complex technological systems and procedures will be necessary to meet the challenge of the 1990's and on into the 21st Century.